SEBI proposes Credit Risk-o-Meter for debt securities to make credit risk easier to assess
SEBI issued the consultation paper on 13 August 2026 and has invited public comments until 3 September 2026. The proposed framework aims to provide investors with a clearer representation of the credit risk associated with debt securities.
Under the proposal, the Credit Risk-o-Meter would be required in offer documents, abridged prospectuses, private placement memorandums and advertisements, as well as on the web and mobile platforms of online bond platform providers (OBPPs). The framework would cover non-convertible securities, commercial papers, securitised debt instruments, security receipts and structured debt or market-linked debentures issued through public issues or private placements.
The proposed meter would map credit ratings from AAA to D into six risk categories, ranging from Lowest credit risk for AAA-rated securities to High to Very high risk of Default for ratings from B+ to D. Each category would carry a corresponding colour code.
Issuers and OBPPs would also be required to disclose the name of the credit rating agency and the actual credit rating below the meter. For unsecured debt instruments, the word unsecured would have to be displayed prominently in bold red text. Where a security has ratings from multiple credit rating agencies, the meter would be based on the lowest rating, while all ratings would have to be disclosed.
For online bond platforms, any change in the Credit Risk-o-Meter would have to be communicated immediately. The meter would also have to be displayed prominently on bond listing and details pages before investment action buttons. OBPPs would have to source rating information from SEBI-registered credit rating agencies and update the meter within 24 hours of receiving a rating-change intimation. Manual overrides would be prohibited and audit trails would have to be maintained.
The proposal builds on SEBI's existing use of colour-coded risk indicators, including the Risk-o-Meter for mutual fund schemes. However, the proposed Credit Risk-o-Meter would specifically indicate the credit risk of an individual debt security, rather than the overall risk of a mutual fund scheme. SEBI's mutual-fund Risk-o-Meter incorporates multiple risk parameters.
SEBI has clarified that the Credit Risk-o-Meter would represent only the credit risk associated with a debt security and would not constitute investment advice or a recommendation to invest. Investors would continue to face other risks, including market and liquidity risks.
The proposed framework remains subject to the consultation process and SEBI's final decision. If finalised, the proposed circular would become applicable 30 days after its issuance.
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